The Senate's First Tentative Step Toward Regulatory Reform

by David A. Ridenour

(This opinion editorial by the Vice President of The National Center for
Public Policy Research appeared in the July 13, 1995 issue of the Washington
Times.)

This week, the Senate resumes debate on a comprehensive regulatory reform
measure that environmentalists and consumer advocates claim is "dangerous"
and "extreme." The bill is neither: It is a modest, tentative
first, step toward a less expensive, more effective and less intrusive system
of regulation.

Sponsored by Senator Robert Dole (R-KS), the Comprehensive Regulatory Reform
Act of 1995 would require, among other things, that agencies conduct cost-benefit
analyses before imposing new regulations. What this means is that federal
agencies would be required to demonstrate that the benefits of imposing
a new regulation -- that is, the number of lives saved, injuries averted,
etc. -- outweigh the costs of the new regulation. The bill goes one step
further: Once an agency demonstrates that the benefits of a regulation do
outweigh the costs, it must also
show that it is the least costly means of achieving the desired result.

Here's what else environmentalists and other members of the regulation lobby
say about Dole's bill:

* Claim: The measure would be both expensive and bureaucratic. It
would require cumbersome and costly additional studies before new regulations
can be made, threatening to bust the budget.

This claim is, as Patrick Buchanan might say, one of the greatest acts of
political cross-dressing we've seen in some years. Since when has the regulation
lobby been concerned about the cost or bureaucratic red tape of any government
action? They didn't seem too concerned about it when they lobbied for the
Endangered Species Act over 20 years ago. But perhaps that's just because
most of the costs of the Endangered Species Act are paid for out of the
pockets of individual property owners and consumers, not out of the federal
treasury.

There is an element of truth, however, to the claim: The Dole proposal would
increase regulatory costs in the short-term -- to federal agencies. According
to a Congressional Budget Office estimate, the cost of the new cost-benefit
analysis and review provisions of the bill would be between $160 and $200
million per year. But at the same time, regulatory compliance costs -- those
expenses paid by average Americans to comply with the federal government's
regulatory mandates -- would decline because the bill would permit unnecessary
and/or unjustified regulations to be scrapped. Regulatory compliance costs
currently run at $850 billion per year, or $6,000 per family. A reduction
in compliance costs of just 1% would save $8.5 billion -- 42.5 times the
added expense to federal agencies. Further, since the measure would apply
the brakes to unwarranted regulations, agency administrative expenses could
actually decline over the long term.

* Claim: The bill would cripple agency (and environmentalist) efforts
for quick approval of new health, safety and environmental regulations.

Good idea, but alas, not true. Under the compromise reached between Senators
Robert Dole (R-KS) and J. Bennett Johnston (D-LA), a new regulation can
be exempt from the cost-benefit analysis procedure if the appropriate federal
agency "finds that conducting cost-benefit analysis is impracticable
due to an emergency that is likely to result in significant harm to the
public..." (S622(f)(1)(A)). As the bill provides no definition of what
would constitute "good cause," this is an enormous loophole through
which virtually any regulation could pass. If the Senate ultimately approves
S. 343, this provision will likely be challenged by more regulatory reform-minded
House members when the bill goes to conference.

* Claim: The measure would hurt minorities because the special circumstances
of minorities -- who are at higher risk of exposure to hazardous substances
-- would not be given adequate weight. Further, many regulations needed
to protect minority populations simply could not pass rigid cost-benefit
analysis tests because these tests weigh only economic factors, not social
or ethical ones.

An interesting story, to be sure, but made out of whole cloth. The Comprehensive
Regulatory Reform Act would require agencies to identify levels of risk
"to the general population and, where appropriate, to more highly exposed
subpopulations." The bill further stipulates that the term "benefit"
be defined as a "reasonably identifiable significant incremental favorable
effect that... the rule is designed to produce, including social and economic
benefits..." In other words, social
factors will also be weighed.

* Claim: The regulatory reform measure would have immediate, catastrophic
effects on human health and safety. Tragedies such as the e. coli bacteria
deaths would be common place.

What the regulation lobby doesn't seem to realize -- but most Americans
do -- is that people injured on the job or poisoned by tainted restaurant
food are every bit as much victims of our regulatory system as small businesses,
landowners and who must cope with the red tape monster. Take the e. coli
bacteria example that the regulators are fond of bringing up. In January
1993, two children died and another 500 people became ill after eating beef
tainted with e. coli bacteria. This wasn't meat that was slaughtered
in someone's backyard and served direct to the public, but meat that had
been given the U.S. Department of Agriculture's stamp of approval. The regulatory
system failed not because there weren't sufficient safeguards, but because
government does not currently set the kind of priorities that a realistic
system of cost-benefit analysis would enable.

The truth is, the regulation lobby will always be able to produce "victims"
to press their case for additional regulations because there is no such
thing as a risk-free world. But it is important to realize that the victims
were not spared even though there are now 64,914 pages of regulations on
the books, backed up by close to 130,000 federal bureaucrats. Indeed, because
agencies are not currently required to set priorities, federal agencies
may be part of the problem. Spending countless man hours enforcing such
silly regulations as OSHA's ban on gum chewing by roofers means these resources
can't be used elsewhere -- where there are real risks.

Despite the fact that the Comprehensive Regulatory Reform Act has been significantly
watered down -- so much so that some conservative groups are calling it
a "setback" for regulatory reform -- Senate Democrats will try
to water it down further, and, if that fails, filibuster it. After the Senate
battle, should the bill survive, it will then likely face a presidential
veto. If President Clinton and Senate allies can't bring themselves to support
this very modest proposal to put the federal government's affairs in order,
their claim to want to "reinvent" government will be exposed for
what it is -- a public relations gimmick. Its time to put up or shut up.